US Government Is World's 3rd Largest Economy

Monday’s open enrollment deadline for ObamaCare, which, with its subsidies and tax credits, represents the largest expansion of government, is a good time to assess the total scale of government in the US.

Appreciating the full scope of the US government is difficult, because its activities are undertaken at the federal, state, and local levels. Adding all of this together, government in the US consumes more than $6 trillion a year. This makes the US government the world’s 3rd largest economy.

The United States economy produces just over $16 trillion in total goods and services every year. China’s economic output is, by the most reliable measure, over $8 trillion. The next largest national economy is Japan, producing around $5 trillion in total economic output. Federal, state, and local governments in the US, however, consume more than $6.2 trillion. US government spending, in fact, is about the same as the total economic output of France and Germany combined.

Getting even a rough grasp of total government spending in the US is tricky. One must navigate multiple data sources and be sure to subtract intergovernmental transfers. The federal government provides more than half a trillion dollars to state governments. State governments transfer nearly an equal amount to local governments. States also have a number of trust funds that aren’t included in their general fund expenditures.

Total federal outlays in 2012 were $3.5 trillion, roughly the size of the German economy. (Consider that; It takes the total economic output of every German, who have the 4th largest national economy, to finance our federal government.) After subtracting federal grants and transfers, state governments in the US consumed just over $1.6 trillion, which is roughly the economy of Spain or India.

Local governments collected revenue of around $1.1 trillion in 2011 (the last year for which information is available). There are more than 90,000 units of local government in the US.

(Note: Figures for state and local governments are based on revenue collected rather than expenditures. Under current reporting, one can account for intergovernmental transfers in revenue reported, but not in expenditures. For example, one can determine how much local governments receive from state governments for public education, but local governments report the total amount spent on education, not the funding source of the spending.)

Taken together, government in the United States, at all levels, consumes about 40% of the overall economy. Considering only of the federal government or individual states obscures the complete footprint of government in the US.